Yahoo Finance When Can We Expect A Profit From Otto Energy Limited (ASX:OEL)?
Otto Energy Limited’s (ASX:OEL): Otto Energy Limited, an oil and gas exploration and production company, explores for, develops, and produces oil and gas primarily in North America. On 30 June 2018, the AU$95m market-cap posted a loss of -US$5m for its most recent financial year. Many investors are wondering the rate at which OEL will turn a profit, with the big question being “when will the company breakeven?” I’ve put together a brief outline of industry analyst expectations for OEL, its year of breakeven and its implied growth rate.
Check out our latest analysis for Otto Energy
According to the industry analysts covering OEL, breakeven is near. They expect the company to post a final loss in 2019, before turning a profit of US$11m in 2020. So, OEL is predicted to breakeven approximately a couple of months from now! What rate will OEL have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 92%, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving OEL’s growth isn’t the focus of this broad overview, however, take into account that generally an oil and gas business has lumpy cash flows which are contingent on the natural resource and stage at which the company is operating. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.
One thing I’d like to point out is that OEL has managed its capital judiciously, with debt making up 36% of equity. This means that OEL has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.
Next Steps:
There are too many aspects of OEL to cover in one brief article, but the key fundamentals for the company can all be found in one place – OEL’s company page on Simply Wall St. I’ve also compiled a list of essential factors you should further examine:
Valuation: What is OEL worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether OEL is currently mispriced by the market.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Otto Energy’s board and the CEO’s back ground.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
